WILL SAN DIEGO SEE ANY IMMEDIATE EFFECTS MARCH 1 OF THE SEQUESTER OF $85 BILLION IN FEDERAL FUNDS?

Last week’s question: Should the federal minimum wage be raised to $9 per hour from $7.25 as President Obama has recommended?

Online poll results

Yes: 40%

No: 60%

YES: Some “effects” have likely already occurred. The possibility of expenditure reductions (from sequestration) have been known for more than a year, so the businesses and agencies likely to bear the brunt of the cuts have been busy planning and budgeting for this event. When March 1 arrives, there won’t be a major reaction because of the advanced planning. In fact, if sequestration is averted, our region could experience a slight economic boost. Also, our region likely has shouldered a disproportionate share of the early cutbacks because the San Diego region is home to a high concentration of Department of Defense-funded activity, which is expected to absorb one-half of the expenditure reductions.

YES: Although federal spending should be reduced by even greater amounts than the sequestration, lopping off spending by such a brutish, indiscriminate method damages essential operations. San Diego has already been impacted under the threat and uncertainties of such misallocated reductions. Due to the extensive network of military operations and defense expenditures throughout the region, and other federal programs over-proportionally represented locally, including the border patrol and the Coast Guard, San Diego will absorb much greater impacts from across-the-board funding cuts than anywhere else in the nation. We project the loss to San Diego’s economy will approach $5 billion per year.

YES: But the impact will not occur all at once. Rather, it will be rolling over the course of the rest of the year. San Diego is more dependent on federal government spending than most metropolitan areas, given the large amount of defense expenditures and scientific research that goes on here. So the sequestration cuts could have a significant, negative impact on the local economy. Other impacts will be on how we go about living our lives, as government furloughs could impact areas such food inspection, air travel, border travel and national park hours. The furloughs also mean less income and therefore less consumption in the local economy.

YES: The Pentagon faces an immediate 7 percent cut. You can’t make that kind of adjustment without having a noticeable impact on the San Diego economy. Macroeconomic Advisers is predicting that the sequester would cost 700,000 jobs nationally. The Army estimates that the cuts would lead to 300,000 furloughs or job losses nationally, of which 11,000 are in California. Sizable cuts in federal contributions to health and education spending and research would also have local effects.

YES: Not on that day, but very soon after. Defense will be cut, and given the importance to San Diego of defense employees, both civilian (furloughs) and uniformed (benefits), and defense contractors (cuts in procurement), there will be direct and indirect impacts. Lower incomes will spread into other sectors, like retail. Furloughed civilians will spend less on everything if their incomes are cut by 20 percent. Nondefense spending of many kinds will also be cut. NIH and NSF spending will be cut, which could affect academic laboratories in San Diego. Other program cuts will also reduce incomes, with secondary effects.